What is an accredited investor and how to be one in Singapore?

What happened? 

Trading platform TD Ameritrade recently announced that it will focus on serving accredited investors in Singapore. 

As a result, it will stop serving retail investors in Singapore from December 2023. 

This led to questions about what is the difference between a retail investor and accredited investor, and why should one become an accredited investor in Singapore. 

Read on to find out what you need to know before opting in as an accredited investor. 

What is an accredited investor?

Retail investors in Singapore are restricted from accessing some types of investments due to the risks associated with such products. 

This is because the average investor may not have the necessary experience or capital to comprehend fully and manage the risks involved in these instruments. 

On the other hand, accredited investors (AI) are investors who have been assessed to possess the financial capabilities and knowledge. 

As an accredited investor, individuals will have access to a broader range of investment opportunities compared to retail investors. 

How to qualify as an accredited investor?

According to the Monetary Authority of Singapore (MAS), an accredited investor in Singapore is defined as an individual who meets one of the following criteria:

• A personal income in excess of S$300,000 per year (or its equivalent in foreign currency) in the last 12 months
• Net personal assets in excess of S$2,000,000 of which the net value of your primary place of residence can only contribute up to S$1 million; (or its equivalent in foreign currency)
• Net financial assets in excess of S$1,000,000 (or its equivalent in foreign currency)

Since 2019, the MAS has introduced an opt-in regime where investors must unilaterally opt in if they want to be considered as accredited investors.

This is unlike in the past where banks would automatically categorise you as an accredited investor without your declaration.

Moreover, any accredited investor can opt out by giving written notice and reverting their status.

What are the benefits of being an accredited investor?

#1 Access to wider range of investments

Accredited investors gain access to a wider range of investment options that are typically not available to retail investors.

These may include selected bonds and structured notes, as well as alternative investments such as private market funds. 

These exclusive investments often come in the form of bespoke wealth solutions that can be tailored to your specific needs.

#2 More options for diversification

By including alternative investments, accredited investors can diversify their investment portfolios across products that are not typically offered to retail investors.

This may include alternative investments such as private equity, early-stage venture capital, or angel investing deals.

These investment products may have different risk profiles and returns compared to traditional asset classes, such as stocks and bonds.

For example, hedge funds may be able to help investors ride through market volatility. 

Thus, accredited investors may have more options to diversify their portfolios. 

What are the disadvantages of being an accredited investor?

#1 – More investor due diligence  

Accredited investors typically have fewer regulatory protections compared to retail investors, in exchange for access to more advanced and sophisticated investment products.

MAS will treat accredited investors as individuals possessing greater knowledge and expertise, leading to fewer mandated safeguards for their protection.

While it is important for all investors to perform their due diligence, this places a greater responsibility on accredited investors to conduct thorough research, understand the risks, and protect their interests.

In addition, some of the instruments available to accredited investors may be more complex, which once again require investors to perform careful evaluation. 

How to become an accredited investor?

To get verified as an accredited investor, you may contact the financial institution to assist you with the opt-in process.

For the accredited investor eligibility assessment, you will be required to submit supporting documents such as:

• For Net Personal Assets / Net Financial Assets:
  • Latest bank account statement or CPF statement,
  • Latest statement of holdings from CDP or brokerage firm(s); or
  • A copy of the title deed of your primary residence.

Except for the title deed, each of the above must be be dated no earlier than 3 months before the date of submitting the form.

• For Income:
  • A copy of your pay slip; or
  • A copy of your employment contract stating your position and income; or
  • A copy of your latest Income Tax Assessment

Each of the above must be be dated no earlier than 3 months before the date of submitting this form.

Where can I find out more about being an accredited investor?

You can find out more about being an accredited investor, you can visit the MAS website. 

Click here to learn more about alternative investments such as hedge funds and private market funds,